Glaxosmsc 5.25% Regulatory News (AG99)

APPENDIX 1

GlaxoSmithKline Capital plc

(Registered number: 2258699)

Interim Management Report

for the half year ended 30 June 2016

Registered office address:

980 Great West Road

Brentford

Middlesex

TW8 9GS

GlaxoSmithKline Capital plc

Interim Management Report

for the half year ended 30 June 2016

Pages

Interim Report

1-2

Income statement

3

Statement of other comprehensive income

4

Statement of financial position

5

Statement of changes in equity

6

Cash flow statement

7

Notes to the financial statements

8-11

Performance

GlaxoSmithKline Capital plc (the "Company") is a member of the GlaxoSmithKline Group of companies (the "Group") and issues notes under the Group's European and US Medium Term Note programme and provides financing and financial services to other Group entities.

The Directors do not envisage any change to the nature of the business in the foreseeable future.

Review of business

The Company made a profit for the half year ended 30 June 2016 of £5,691,000 (2015: £4,061,000), which will be transferred to reserves. The Directors are of the opinion that the current level of activity and the period end financial position are satisfactory and will remain so in the foreseeable future.

No dividend is proposed to the holders of Ordinary Shares in respect of the period ended 30 June 2016 (2015: £nil).

At 30 June 2016, the Company had in issue £7,775,675,000 Euro Medium Term Notes and £2,995,433,000 US Medium Term Notes (2015: £7,333,954,000 and £2,708,365,000 respectively) which mature at dates between 2017 and 2045. All notes currently in issue pay interest on a fixed rate basis.

Principal risks and uncertainties

The Directors of GlaxoSmithKline plc manage the risks of the Group at a group level, rather than at an individual business unit level. For this reason, the Company's Directors believe that a discussion of the Group's risks would not be appropriate for an understanding of the development, performance or position of the Company's business. The principal risks and uncertainties of the Group, which include those of the Company, are discussed in the Group's 2015 Annual Report and Second Quarter 2016 Results Announcement which do not form part of this report

Details of the Company's Financial risk management is also disclosed in the Company's Director's Report and Financial Statements for the year ended 31 December 2015.

Going concern

After making certain enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing this document, due to ongoing support from the intermediate parent undertaking, GlaxoSmithKline Finance plc.

Directors' responsibility statement

The Board of Directors approved this document on 27 July 2016.

The Directors confirm that to the best of their knowledge this unaudited condensed financial information for the six months ended 30 June 2016 has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" and that the interim management report herein includes a true and fair view of the information required by Disclosure and Transparency Rules (DTR) 4.2.7.

GlaxoSmithKline Capital plc

Registered number: (2258699)

Results announcement and interim management report for the half year ended 30 June 2016

The Directors of the Company are:

S P Dingemans

Edinburgh Pharmaceutical Industries Limited

Glaxo Group Limited

On behalf of the Board

A Walker

For and on behalf of Glaxo Group Limited

Corporate Director

27 July 2016

Internet

This Announcement and other information about the GSK Group are available on the website at: http://www.gsk.com

GlaxoSmithKline Capital plc

Registered number: (2258699)

Income statement

for the half year ended 30 June 2016

Period ended

Period ended

30 June 2016

30 June 2015

Note

£'000

£'000

Other operating income

3

1,527 

(353)

Operating profit/(loss)

1,527 

(353)

Finance income

4

196,314 

205,468 

Finance expense

5

(190,729)

(199,964)

Net finance income

5,585 

5,504 

Profit on ordinary activities before taxation

7,112 

5,151 

Tax on profit on ordinary activities

6

(1,421)

(1,090)

Profit for the financial period

5,691 

4,061 

GlaxoSmithKline Capital plc

Registered number: (2258699)

Statement of comprehensive income

for the half year ended 30 June 2016

Period ended

Period ended

30 June 2016

30 June 2015

Note

£'000

£'000

Profit for the financial period

5,691

4,061

Items that may be subsequently reclassified to the Income statement:

Reclassification of cash flow hedges to the Income statement

477

477

Other comprehensive income for the financial period

477

477

Total comprehensive income for the financial period

6,168

4,538

GlaxoSmithKline Capital plc

Registered number: (2258699)

Statement of financial position

As at 30 June 2016

Period ended

Period ended

30 June 2016

30 June 2015

Note

£'000

£'000

Current assets

Other receivables

7

10,909,932 

10,166,218 

-

including £9,212,417,000 (2015: £9,986,490,000)

due after more than one year

Cash and cash equivalents

2 

2 

Total current assets

10,909,934 

10,166,220 

Creditors: amounts falling due within one year

8

(1,614,897)

(104,207)

Net current assets

9,295,037 

10,062,013 

Total assets less current liabilities

9,295,037 

10,062,013 

Creditors: amounts falling due after more than one year

8

(9,269,175)

(10,042,319)

Net assets

25,862 

19,694 

Capital and reserves

Called up share capital

100 

100 

Other reserves

(9,437)

(9,914)

Retained earnings

35,199 

29,508 

Total shareholders' funds

25,862 

19,694 

GlaxoSmithKline Capital plc

Registered number: (2258699)

Statement of changes in equity

for the half year ended 30 June 2016

Called up

Share

capital

Other

reserves

Retained

earnings

Total

shareholders'

funds

£'000

£'000

£'000

£'000

At 1 January 2015

100

(10,435)

20,759

10,424

Profit for the financial period

-

- 

4,061

4,061

Other comprehensive income for thefinancial period

-

477 

-

477

At 30 June 2015

100

(9,958)

24,820

14,962

Called up

Share

capital

Other

reserves

Retained

earnings

Total

shareholders'

funds

£'000

£'000

£'000

£'000

At 1 January 2016

100

(9,914)

29,508

19,694

Profit for the financial period

-

- 

5,691

5,691

Other comprehensive income for thefinancial period

-

477 

-

477

At 30 June 2016

100

(9,437)

35,199

25,862

GlaxoSmithKline Capital plc

Registered number: (2258699)

Cash flow statement

for the half year ended 30 June 2016

Period ended

Period ended

30 June 2016

30 June 2015

Note

£'000

£'000

Net cash inflow from operating activities

10

6,353 

651,922 

Cash flow from financing activities

Repayment of short-term loans

- 

(648,232)

Decrease in loans with Group undertakings

(6,354)

(3,636)

Net cash outflow from financing activities

(6,354)

(651,868)

(Decrease)/increase in cash in the period

(1)

54 

Cash at beginning of period

3 

3 

Decrease in cash

(1)

- 

Cash at end of period

2 

3 

GlaxoSmithKline Capital plc

Registered number: (2258699)

Notes to the financial statements for the period ended 30 June 2016

1

Accounting presentation and policies

This unaudited Results Announcement containing condensed financial information for the six months ended 30 June 2016 is prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" using the recognition and measurement requirements of Financial Reporting Standard 101 "Reduced Disclosure Framework" and in accordance with the Listing Rules of the UK Listing Authority.

2

First time application of FRS 100, 101 and FRS 104

Effective from 1 January 2015, the Company has adopted Financial Reporting Standard 100 "Application of Financial Reporting Requirements" ("FRS 100"), Financial Reporting Standard 101 "Reduced Disclosure Framework" ("FRS 101") and FRS 104 "Interim Financial Reporting". In previous years, the financial statements and interim results announcements were prepared in accordance with applicable UK accounting standards and pronouncements on interim reporting issued by the Accounting Standards Board (ASB).

Under previous applicable UK accounting standards, the Company adopted FRS 26 "Financial Instruments: Measurement" and the effect of this was the revaluation of financial assets and liabilities to fair value, including the valuation of derivative instruments at market rates. Therefore, the change in the basis of preparation to FRS 100 and FRS 101 has not altered in any way the recognition and measurement requirements previously applied in accordance with applicable accounting standards. Consequently the principal accounting policies set out in the Company's audited Financial Statements 2015 are unchanged and have been consistently applied in the preparation of this Results Announcement.

This Results Announcement does not constitute statutory accounts of the Company within the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The Statement of Financial Position as at 31 December 2015 has been derived from the full accounts published in the Financial Statements 2015, which have been delivered to the Registrar of Companies and on which the report of the independent auditors was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

3

Other operating income

Period ended

Period ended

30 June 2016

30 June 2015

£'000

£'000

Exchange gain/(loss) on foreign currency transactions

1,527 

(326)

Management fee

- 

(27)

1,527 

(353)

4

Finance income

Period ended

Period ended

30 June 2016

30 June 2015

£'000

£'000

On loans with Group undertakings

196,314 

205,468 

Total finance income

196,314 

205,468 

5

Finance expense

Period ended

Period ended

30 June 2016

30 June 2015

£'000

£'000

Interest expense arising on financial liabilities at amortised cost

(190,252)

(199,487)

Reclassification of cash flow hedge from other comprehensive income

(477)

(477)

Total finance expense

(190,729)

(199,964)

GlaxoSmithKline Capital plc

Registered number: (2258699)

Notes to the financial statements for the period ended 30 June 2016

6

Tax on profit on ordinary activities

Period ended

Period ended

30 June 2016

30 June 2015

Income tax expense on ordinary activities

£'000

£'000

Current tax:

UK corporation tax at 20% (2015: 20.25%)

(1,421)

(1,090)

Income tax expense on ordinary activities

(1,421)

(1,090)

7

Other receivables

30 June 2016

31 December 2015

£'000

£'000

Amounts due within one year

Amounts owed by Group undertakings

1,493,098 

- 

Amounts owed by Group undertakings - loans

86,435 

74,346 

Amounts owed by Group undertakings - current accounts

117,982 

105,382 

1,697,515 

179,728 

Amounts due after more than one year

Amounts owed by Group undertakings

9,210,241 

9,984,314 

Deferred tax

2,176 

2,176 

9,212,417 

9,986,490 

10,909,932 

10,166,218 

Amounts owed by Group undertakings include the net proceeds of bond issuances that have been advanced as loans totalling £10,703,339,000 (2015: £9,984,314,000), which are unsecured with interest charged at between 1.05% and 6.50% per annum and repayable at maturity dates between 2017 and 2045. In addition, there are deposits with Group undertakings totalling £86,435,000 (2015: £74,346,000), which are unsecured, interest bearing and repayable on demand.

8

Creditors

30 June 2016

31 December 2015

£'000

£'000

Amounts falling due within one year

Amounts owed to Group undertakings

(21)

(67)

Corporation tax

(3,554)

(2,133)

Loans payable:

US Medium Term Notes

(1,501,933)

- 

Accruals and deferred income

(109,389)

(102,007)

(1,614,897)

(104,207)

Amounts falling due after more than one year

Loans payable:

Euro Medium Term Notes

(7,775,675)

(7,333,954)

US Medium Term Notes

(1,493,500)

(2,708,365)

(9,269,175)

(10,042,319)

(10,884,072)

(10,146,526)

GlaxoSmithKline Capital plc

Registered number: (2258699)

Notes to the financial statements for the period ended 30 June 2016

Amounts owed to Group undertakings are unsecured and repayable on demand.

The corporation tax creditor contains amounts which will be paid to fellow Group companies.

Debt is unsecured and there are no debt covenants in relation thereto.

Accruals and deferred income relates to accrued interest payable on US Medium Term Notes and Euro Medium Term Notes.

9

Fair value of financial assets and liabilities

The fair values of the financial assets and liabilities are included at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following methods and assumptions were used to estimate the fair values:

·

Cash at bank - approximates to the carrying amount;

·

Short-term loans and overdrafts - approximates to the carrying amount because of the short maturity of these instruments;

·

Medium-term loans - market value based on quoted market prices in the case of US and Euro Medium Term Notes, intercompany receivables; and other fixed rate borrowings, approximates to the carrying value in the case of floating rate bank loans and other loans; and

·

Receivables and payables - approximates to the carrying value.

There are no material differences between the carrying value of the Company's other financial assets and liabilities and their estimated fair value, with the exception of Bonds, for which the carrying values and fair values are set out in the table below.

30 June 2016

31 December 2015

Carrying value

Fair value

Carrying value

Fair value

£'000

£'000

£'000

£'000

Cash and cash equivalent

2 

2 

2 

2 

Loans and receivables:

Loans with Group undertakings

10,703,339 

12,794,093 

9,984,314 

11,180,812 

Other receivables

204,417 

204,417 

179,728 

179,728 

Total financial assets

10,907,758 

12,998,512 

10,164,044 

11,360,542 

Financial liabilities measured at amortised cost:

£ Euro Medium Term Notes

(4,049,116)

(5,596,191)

(4,047,820)

(4,895,199)

€ Euro Medium Term Notes

(3,726,559)

(4,105,992)

(3,286,134)

(3,549,695)

US$ US Medium Term Notes

(2,995,433)

(3,091,910)

(2,708,365)

(2,735,918)

Other payables

(109,410)

(109,410)

(102,074)

(102,074)

Total financial liabilities

(10,880,518)

(12,903,503)

(10,144,393)

(11,282,886)

Net financial assets and liabilities

27,240 

95,009 

19,651 

77,656 

The total financial liabilities and assets of £12,794,093,000 (2015: £11,180,812,000) for which the fair value is disclosed in the table above are categorised as Level 1, where quoted prices in active markets are used. All other assets and liabilities for which fair value is disclosed in the table above are categorised as Level 3, where one or more of the significant inputs to the valuation model is not based on observable market data.

GlaxoSmithKline Capital plc

Registered number: (2258699)

Notes to the financial statements for the period ended 30 June 2016

10

Reconciliation of operating profit to net cash inflow from operating activities

Period ended

Period ended

30 June 2016

30 June 2015

£'000

£'000

Operating profit

1,527 

(353)

Exchange movements

(1,527)

547 

Movements in working capital:

Decrease in debtors

- 

(201)

Decrease in creditors

(46)

- 

Interest paid

(177,324)

(175,706)

Interest received

183,723 

182,669 

Loan repayments received from Group undertakings

- 

644,966 

Net cash inflow from operating activities

6,353 

651,922 

11

Related party transactions

As a wholly owned subsidiary of the ultimate parent company, GlaxoSmithKline plc, advantage has been taken of the exemption afforded by FRS 101 "Reduced Disclosure Framework" not to disclose any related party transactions within the Group. There are no other related party transactions.